Q&A: Determining contractor tax obligations in a multi-layer foreign and domestic subcontracting chain
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Thanh Hoa Tax Department No. 9 addresses contractor tax obligations in the chain: Chinese company (operating in Vietnam) engages Company A (Hong Kong) - Company A sub-contracts to Company B (China) - Company B engages Company C (Vietnam). Under Articles 1, 5, 6 of Circular 103/2014/TT-BTC and Articles 7, 9 of Circular 60/2025/TT-BTC, contractor tax arises at each contract pair where a foreign party supplies services performed in Vietnam. Company C (Vietnamese) performing the actual construction does not trigger contractor tax. The withholding and declaration obligation falls on the Vietnamese party in each transaction: the Chinese company (for payments to Company A), while Company B's obligations depend on its permanent establishment status and chosen declaration method.
Background
The contracting chain is:
- Chinese company (operating in Vietnam) engages Company A (Hong Kong): renovation of factory premises in Vietnam.
- Company A sub-contracts to Company B (China): construction work in Vietnam.
- Company B engages Company C (Vietnam): direct construction and renovation.
Response from Thanh Hoa Tax Department No. 9
1. Which parties have contractor tax obligations?
Under Articles 1, 5, and 6 of Circular 103/2014/TT-BTC and Circular 60/2025/TT-BTC:
- Company A (Hong Kong): supplies services performed in Vietnam to the Chinese company — contractor tax arises in Vietnam (foreign contractor CIT and VAT).
- Company B (China): supplies services performed in Vietnam to Company A — contractor tax arises in Vietnam.
- Company C (Vietnam): incorporated and operating in Vietnam — no contractor tax; pays CIT and VAT under normal Vietnamese tax rules.
2. Who must withhold and declare contractor tax at source?
- For the Chinese company's payments to Company A: the Chinese company (the Vietnamese-side payer) is responsible for withholding, declaring, and remitting contractor tax on behalf of Company A.
- For Company A's payments to Company B: depends on whether Company A has a permanent establishment in Vietnam and its chosen declaration method (direct self-declaration or withholding by the Vietnamese party).
3. Each party's tax obligations
- Chinese company: withholds and remits contractor tax for Company A; self-declares CIT and VAT for its own Vietnamese activities.
- Company A: foreign contractor tax on Vietnam-sourced income.
- Company B: foreign contractor tax on Vietnam-sourced income; permanent establishment determination required.
- Company C: CIT and VAT under Vietnamese law.
Applicable Regulations
- Circular 103/2014/TT-BTC dated 6 August 2014 (foreign contractor tax).
- Circular 60/2025/TT-BTC dated 1 July 2025.
- Article 7 of Circular 69/2025/TT-BTC dated 1 July 2025.
- Circular 20/2026/TT-BTC dated 12 March 2026.